Know what’s the worst advice for web hosting shoppers? This one:
“Never pay hosting fees upfront”
I had been reading the line again and again in hosting articles or blogs or even expert’s tips. I was so used to the line that I suspect myself wrote the same thing when writing shopping tips on web hosting.
“Don’t pay your hosting fees upfront!” “Signup and test your hosting on month-by-month basis to protect your money in case something with the hosting goes drastically wrong.” “Never subscribe more than 3 months on an unfamiliar web hosting.” I’m sure you heard as much of similar advice as I do.
Now “Don’t pay fees upfront” might be a good advice to protect yourself from scammers; this advice, however, does not fit for all hosting. Instead, if you’re signing up with a trustworthy web host, not paying hosting fees upfront will actually cause you losing more money!
(seriously, people who gave the advice probably didn’t read the hosting company’s refund policy well.)
Why paying web hosting fees upfront is beneficial?
Let’s do some calculation with Bluehost as our example. We’ll split into two scenario: customer A signing up on a short term 3 months plan; and another customer B signing up on a 24 months plan.
How much to pay (and refund) for a Bluehost 3 months plan
Here are the basic cost for 3 months hosting account at Bluehost (assuming new domain registration).
- Setup fees: $30 (one time)
- Domain registration: $10 (one time)
- Hosting fees: $9.95/mo x 3 = $29.85
- Total spending for 3 months = $69.85.
- Total spending for 24 months = $69.85 + ($9.95 x 18) = $248.95
Now say that for some reason the customer doesn’t like the service in Bluehost and he/she asks for a refund within the first 30 days. The money back into customer’s pocket is the money spent on hosting ($9.95 x 3 = $29.85), setup fees and domain registration is non refundable.
Total loses = $40.
On another scenario, say that the customer asks for the refund after trial period, example: day 31. Based on Bluehost’s pro-rated refund policy (yes, you can refund even after the trial period), his/her refund amount will be $9.95 x 2 = $19.9.
Total loses = $49.95.
How much to pay (and refund) for a Bluehost 24 months plan
Now if the customer is going with the long term subscription, here’re the basic cost.
- Setup fees: Free
- Domain registration: Free
- Hosting fees: $7.95/mo x 24 = $190.80
- Total spending for 24 months = $190.80
The dollars customer pays upfront for a 24 months plan at Bluehost will be $190.80.
For refund within the trial period (30 days), the amount refunded is $180.80 ($7.95 x 24 – $10 domain registration).
Total loses = $10.
On the other hand, if the refund is filed after trial period, again say it’s day 31 after subscription, the amount back into customer’s pocket will be $172.85 (7.95 x 23 – $10 domain registration).
Total loses = $17.95.
Difference between paying fees up front and not paying upfront
Summarizing the situation, here’re the differences between customer A (who do not pay upfront) with customer B (who pay upfront).
Refund within the trial period
- Customer A’s loses: $40
- Customer B’s loses: $10
- Difference: Customer A lost extra $30.
Refund after the trial period
- Customer A’s loses: $49.95
- Customer B’s loses: $17.95
- Difference: Customer A lost extra $30.
Full subscription without refund
- Customer A’s hosting cost: $248.95
- Customer B’s hosting cost: $190.80
- Difference: Customer A pays extra $58.15
So which plan cost you more?
Bottom line: Not paying hosting fees upfront is not smarter!
If you follow me until here, you should learned that not paying your hosting fees upfront might not be the smart move always. The “don’t pay fees upfront’ advice simply doesn’t fit for all hosting companies. To stay informed, we, as customers, will always need to be clear with the company’s refund policy.
On the other hand, note that my example assume the hosting company we’re dealing with is trustworthy and honor their refund policy. I’m not suggesting you to pay hosting fees upfront with all sort of hosting companies. But for certain web hosts with good reputation, like Bluehost and Hostgator, paying your hosting fees upfront is actually the smart move to go with.